Manuscript Type: Empirical Research Question/IssueThe relationship between board members and top executives is held central to corporate governance, yet studies of it are relatively few and our knowledge of its consequences is limited. This study aims to address how board-CEO relationships, in terms of power balance and social ties, contribute to the performance of new product introduction. It proposes a contingency view to highlight the context-dependent nature of such governance arrangements.
Research Findings/ResultsUsing survey and archival data in a sample of 198 industrial firms in Taiwan, this research finds that the two distinct types of board-CEO relationships relate curvilinearly to the performance of new product introduction. Furthermore, such universal relationships are moderated by market instability and board interlocks, respectively. Theoretical Implications: This study departs from the traditional agency view to an argument that fine-tuned board-CEO relationships, in light of sociopolitical and sociopsychological forces, and will serve as an essential enabling context for managerial risk taking. It demonstrates that research in this field should accommodate different theories to elaborate on the underlying tensions in the corporate governance and emphasize the merits of complementarity. Practical Implications: Acknowledging that good governance design softens managerial risk aversion, this study helps identify the governance conditions in which risk differentials between the board and CEO may align, and thus when exploratory efforts, in the form of new product introduction, are more likely to succeed.
Although the importance of strategy for firm performance has been studied, little evidence has been offered regarding this linkage in hostile environments characterized by a lack of exploitable market opportunity and fiercer competition. This study aims to examine the viability of strategic postures of technological differentiation in such a setting using data from 1,054 samples across 32 industries in 30 countries during 2001–2002, when global economies suffered a downturn. The empirical results show that differentiation‐oriented firms underperformed efficiency‐oriented ones during this period. However, in the face of deteriorating market conditions, a strategic orientation toward technological differentiation, in concert with an internal commitment to R&D investment or external munificence toward technological opportunity, yields better performance. Finally, this study finds that firms with tight coupling between differentiation and efficiency outmaneuver those with a pure strategy or no strategy at the time of an economic downturn.
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